House climate bill deal reached

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A few hours after brokering a deal on the House climate bill, Rep. Collin Peterson, D-Minn., chairman of the House Agriculture Committee, explained why compromise was necessary, how the controversial indirect land use provisions will be handled and repeatedly commented on the mutual distrust between agriculture and the EPA.

“We’ve been working for a considerable time with (Rep. Henry Waxman, D-Calif., chairman of) the House Energy and Commerce Committee on the agriculture concerns in this bill,” said Peterson during a June 24 teleconference. “Last evening, we were able to come to a conclusion on that.

“Basically, there will be an offset program for agriculture we believe will work. We were able to write the language for it. The decision was made to leave the running of the program, the rulemaking and so forth with USDA — and without EPA involvement.”

Peterson has long derided the EPA’s ability to craft cap-and-trade rules that won’t adversely impact farmers. To get past that “sticking point”, the Peterson-Waxman compromise calls for USDA to assume the role of chief cap-and-trade rule-maker.

Even so, “there probably is a role for EPA in this,” conceded Peterson. “The bottom-line problem is EPA doesn’t trust agriculture and agriculture doesn’t trust EPA.

“I don’t have a problem with (EPA) having some kind of oversight or audit function at the macro level — you know, a department looking at the overall program. But we weren’t able to work that out. So, we’ll send a letter to the White House to get their input. I’ve been talking to them and they seem to generally agree with us. … They’ll give their advice about how EPA could be involved in this process.”

The second major sticking point — indirect land use — “is out of the bill,” announced Peterson. “There will be a five-year study (on that). Depending on what the conclusion of the study is, the three agencies — EPA, Department of Energy and USDA — will all have to sign off. That means the USDA has veto power over this. Without all three, it can’t move forward.”

And there is a further backstop. If all three agencies do sign off on the conclusions, “there’s a provision for another year for Congress to intervene if we disagree with the decisions made. Nothing (on indirect land use) can happen for six years. It’s out of the whole equation, out of the Renewable Fuel Standard and so forth. We thought that was acceptable.”

In addition, the House bill would exempt agriculture from having to reduce greenhouse gas emissions.

“We put the agriculture exemption back in the bill. It’s clear that agriculture won’t be put under the cap and charged with anything in this bill.”

Also in the bill:

• A provision allowing rural utility companies to buy a piece of future nuclear plants by using federal funds. Peterson also repeatedly spoke on the need to protect and help rural electricity providers take advantage of the new cap-and-trade legislation.

• “Early adopters” of locking carbon into soil (through con/reduced-till and planted trees) will be rewarded. Efforts as far back as 2001 will be eligible for carbon credits.

“One of the parts of the agreement is if you’ve been doing the right thing, you’ll get credit for it under this program. That wasn’t anticipated by EPA. So, people who are doing no-till, those planting trees, (doing) conservation and so forth won’t be precluded from participating in the offset program.

“USDA will do the rules so we expect them to be somewhat farmer friendly and produce rules that will work for production agriculture.”

• Futures markets for carbon contracts will be overseen by the Commodity Futures Trading Commission (CFTC) and the Federal Energy Regulatory Commission (FERC) would oversee the cash market.

“There won’t be any trading of carbon credits on anything other than the regulated exchange,” insisted Peterson. “No over-the-counter, no customized swaps — it’ll have to be standardized on an exchange.” Some politicians called for “the FERC to take over the futures market. That’s not going to happen because they don’t know how to do that. We’re fine with them running the cash market.”

Informed that there have been claims some Midwest states could see electric rates doubling under the legislation, Peterson said, “I don’t think that’s true.

“We can’t quantify this, but we think the impact won’t be anything like a doubling of bills. Worst-case, from what I see — and this is out of the blue, so don’t hold me to it — is a 5 to 10 percent increase in electricity costs for farmers. For consumers, they won’t see that because the majority of them will be insulated through the process.

“There are also credits that will be given out to people who are below 150 percent of poverty. So, if you have a farm that isn’t making any money, you’ll get some extra money out of that.”

Further, a recent study by the Congressional Budget Office (CBO) produced “a score that showed the cost (of the legislation) to be significantly less than has been bandied about by people. My experience with the CBO is they’re tough and, if anything, overestimate things. They’re estimating something like $175 per family. That doesn’t quantify what the effects could be in agriculture but, because of the free allowances given out the amount of increased costs to be generated will be fairly small.”

The offset program “is now, we believe, workable and is a potential source of income for farmers. That should mitigate any additional costs for those who can produce. There’s still some talk about trying to (address) those unable to participate in the offsets: fruit and vegetables, rice, perhaps cotton and peanuts. That’s a work in progress.”

Pushed for a reason that the climate bill will be voted on so quickly, Peterson said the urgency was due to President Obama’s scheduled early July visit with the G-8. Obama “wants something in hand to show (those at the conference) what we’re working on. That’s part of what’s driving this.”

Prominent naysayers of the legislation — among them the American Farm Bureau Federation — are still warning the legislation contains pitfalls for agriculture. To assuage such concerns, Peterson said the current bill is still a long way from finished.

The House bill “isn’t becoming law. I can guarantee you this will be further refined in the Senate in a way that will be beneficial to (rural states). I have no doubt about that.”